Overall, alternative asset allocations rose to 43% of the average portfolio in 2011, up from 38% in 2010, according to a report from investment manager Commonfund, based on a survey of 147 institutions.
Private equity represented a quarter of alternative investments in 2011, up from 19% a year earlier. Venture capital, meanwhile, accounted for 8% of alternatives, up from 7% the prior year.
One likely reason foundations are putting more money into private equity and alternatives is that those assets have posted superior returns. While overall net investment returns for foundations in 2011 were slightly negative, impacted by steep declines in international equities, private equity and venture capital were positive.
Venture assets generated the highest returns of any alternative asset in 2011, with a 14.2% return. Private equity was also well in the black, with a return of 8.9%.
Foundations of all sizes reported increases in allocations to alternative assets between 2010 and 2011. As for private equity specifically, the largest jumps in allocations came from foundations at the extremes of the spectrum, as those with less than $100 million under management, and those with more than $1 billion, increased investments by 6% on average.
The full report is here.
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